SEC Awards Compliance Officer Whistleblower Over A Million Dollars

The SEC announced an award of more than a million dollars to a compliance officer who had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors. This is the second award the SEC has made to an employee with internal audit or compliance responsibilities, after the SEC’s August 2014 award of $300,000 to a company employee who performed audit and compliance functions.

The SEC rules allow compliance officers to receive whistleblower awards when they report to the SEC after giving the company a chance to correct the problem. Sean McKessy, chief of the SEC’s Office of the Whistleblower, said employees who perform internal audit, compliance, and legal functions are “often are privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one.” Andrew Ceresney, Director of the SEC’s Division of Enforcement, noted that, in this case, the compliance officer “reported misconduct [to the SEC] after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”

Since 2011, the SEC’s whistleblower program has paid more than $50 million to 16 whistleblowers. The awards typically range from 10 to 30 percent of the money collected in a successful enforcement action with sanctions exceeding $1 million. With these two awards, the SEC has made it clear that it will take seriously reports from compliance officers – and reward them when the information leads to an enforcement action.

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